ABN AMRO: 'New signs of increasing tension on the housing market'

Press release -

Once more the housing market is showing signs of increasing tension. ABN AMRO's Group Economics department notes the narrowing average gap between the prices asked and offered for homes.

In 2018's first Housing Market Monitor the economists establish that, based on historical data, this often signals further price gains. There is a risk, however, that these price gains could turn out to be unsustainable in the longer term, for instance if interest rates pick up again and if housing construction increases. That said, Group Economics has not seen any signs that such developments are likely in the short term.

In the Randstad conurbation, housing prices have returned to their pre-crisis levels or even risen beyond that. This is not the case in many other parts of the Netherlands, however, although the market is getting tighter there as well. As a result, 40% of homes get sold at or above the asking price. The average gap between the asking price and the price offered has narrowed from 6.8% in 2013 to 1.1% now. ABN AMRO economist Philip Bokeloh: "There is currently a significant unmet demand for suitable homes. Due to a lack of new housing construction, that will not change for the better anytime soon. Sellers are reaping the benefits from their solid market position and keep listing higher and higher. And those participating in the hunt for a house are facing fierce competition, meaning they'll have to increase their offers to outbid one another."

No cause for panic

Despite these rising tensions, Bokeloh emphasises that there is no cause for panic. "In most housing market areas, price levels still approximate structural levels. And in areas where that is not the case, price corrections will still be quite some time away. However, it would be wise to keep an eye on developments. Buying a home now for a possibly inflated price could lead to difficulties later in trying to break even or turn a profit in selling the house. These things happen when the available supply of houses increases, and buyers get more choice. More choice, after all, pushes down prices. A second consideration is interest rates. If rates get hiked in the future, starters could face even greater difficulty in buying a home. And a lack of new buyers on the housing market may in turn amp up pressure on prices."

Price inflation forecast raised

ABN AMRO Group Economics predicts further tightness on the housing market in the year ahead. As such, the economists have raised their house price inflation forecast for 2018 by one percentage point to 6%. That figure is mild compared to 2017, when house price inflation is estimated to have been as high as 7.5%.

Number of sales on a steep decline in years to come

Because the supply of available houses continues to dwindle, the number of transactions in certain regions (including the Randstad) has started to decline too. Group Economics expects this downward trend to persist in the years to come, projecting the number of transactions in the Netherlands to decline by 5% in 2018. This is in stark contrast to last year, when the number of transactions increased. Although the past year's final sales figures have not yet been published, ABN AMRO's economists estimate an increase of 13.5% in the number of homes sold in 2017. That's a modest downward adjustment from the previous Group Economics projection of 15%. Due to the anticipated fall in sales, the 2017 record figure of 244,000 transactions is not likely to be matched in the next few years.

Share

Join the discussion

ABN AMRO would like to know your opinion, so below this article you can react to this article via Disqus. By doing so, you agree to the conditions for reacting to articles on our website.

Related news items

More news about the housing market